Nashua Telegraph Editorial: Tax cuts offer no growth guarantees
If you were sitting around the kitchen table discussing how best to improve the family budget picture, you’d have to make some choices.
Some of them would be obvious, like canceling that family vacation everybody was looking forward to, buying cheaper brands of groceries, perhaps, and not going out to eat.
Other choices would be more involved, like whether someone in the family should get a part-time job to bring in extra money.
The last thing you’d probably do is volunteer for a cut in pay.
Yet, that’s the direction some Republicans in the New Hampshire Senate are advocating when they suggest that the state cut its two major business taxes, the Business Profits Tax and the Business Enterprise Tax.
One bill in the Senate, sponsored by Sen. Jeb Bradley, R-Wolfboro, would lower the state’s Business Profits Tax from 8.5 percent to 8 percent over 4 years. “Lowering the state’s Business Profits Tax would continue to encourage businesses to seek growth and would help attract new businesses to New Hampshire,” Bradley said.
It would also mean $10 million less in revenue for the state in fiscal years 2016 and 2017, and $20 million less in fiscal years 2018 and 2019.
Another bill, sponsored by Sen. Andy Sanborn, R-Bedford, would lower the Business Enterprise Tax from .75 percent to .675 percent over three years and would result in $7.6 million less in fiscal year 2017, $15 million less in 2018 and $22 million less in fiscal year 2019.
Gov. Maggie Hassan has said the tax cuts would create a hole in the budget, though Bradley and Sanborn see things differently.
The underlying premise is that cutting the rates would create more revenue by enticing new businesses to relocate to the state, or prompting those that are already here to expand and hire more workers.
That might be true if the state’s business taxes were the only obstacle to economic growth, but they’re not. Other factors include high energy costs, an aging, less-productive workforce and the exodus of the state’s young adults. As a practical matter, a half percent decrease in the BPT over 4 years is little more than symbolic and is unlikely to turn the state into a business magnet.
We understand that the state’s business tax rates are among the highest in the nation, and we’re not inherently opposed to some reduction. But we’re also not under the illusion that it would lead to an economic promised land of jobs and revenue growth.
The more prudent assumption to make when lowering tax rates is that revenue will be lost and will have to be made up by cutting state programs and services or finding new revenue sources.
Honesty dictates that lawmakers identify which areas of government would take the hit if the revenue growth they project fails to materialize, as we think is the case.
The state’s higher education system? That was targeted the last time Republicans controlled both chamber of the Legislature in 2011-12, but New Hampshire college graduates already carry the highest student debt burden in the country and UNH is already out of reach for many of them. Cutting state support for higher education will only accelerate the outward migration of young people from the state.
Health and Human Services is the state’s largest agency, but they’re already facing a $58 million budget shortfall that is partly the result of the state’s settlement of a lawsuit brought by the federal government with regard to mental health services, and another brought by the state’s hospitals over a tax that was ruled unconstitutional. [...]
Before lawmakers cut business taxes, they should first explain how they would make up the lost revenue – preferably by identifying offsets that don’t involve magical thinking or hurt the state’s most vulnerable.
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